Wednesday, March 2, 2016

Goal Update: End of February 2016

At the end of each month, I post an update of my goals, including a brief discussion of any notable events that might have occurred during the month. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of February, 2016
Current value: $21,113
Change from last month: +$293
Percent of Goal:  19.42%

Note that the funds in this account are invested in stock, so there will be fluctuations in value that are outside my control. I never withdraw money from this account, so any dips are purely due to stock price changes.

Events Of Note Last Month:

Income this month from my online courses sales was $154. Low, as expected. This payment was for December sales and that is my slowest month.

Not much change in my account value this month and I'm still hovering just under 20% of my goal. I didn't get a big gain this month, not only because my courses didn't bring in much money, but also because I sold most of my stock. I sold $20,000 of stock, leaving me with just 2 shares, and put the proceeds into a hard money loan. That means I've unlocked a new achievement!

My partner has made a loan of $577,500 as a first mortgage on a group of properties - a single family house and a multi-unit property consisting of a duplex and a triplex. Our borrower, who we've done dozens of loans with in the past, bought the property at a foreclosure auction for $830,000. The as-is price for the property, which is what we feel the property is worth right now, without any improvements, we estimate to be about $800,000. (So yes, if we were doing the buying at the auction, we probably wouldn't have bought this at the $830,000 price. But there were multiple people bidding on this property, so the price ended up a bit higher than what we feel it is worth as-is.) The borrower is going to fix the property up and sell it (i.e., he is going to "flip" it). We estimate the after repair price to be between $1 million and $1.2 million. Yes, that's a high value, but this property is in Hayward, California, which is in the Bay Area. That's just what property costs out there.

My $20,000 is part of the $577,500 total loaned. I'm earning an 8% return, paid monthly with interest-only payments. That works out to $133.33 per month. The loan is due in full in 1 year or when the property is sold, which ever comes first. Here are a couple pictures of the properties. The first is the multi-unit portion and the second is the single family home.

I think John Mellencamp sang about this place...

How safe is this investment? We feel it's pretty safe. If the properties are worth $800,000, our loan of $577,500 gives us a loan to value ratio of 72%, which is good. This means if the borrower didn't pay us and we had to foreclose and sell the property, we've got a $222,500 safety margin for the hassle of doing all that. If we did have to foreclose, we would have, in effect, bought a 6 unit property (1 triplex, 1 duplex, and a single family home) at about $100,000 per unit. In the Bay area, this is a fantastic deal. We figure each unit would rent for around $1,800 per month if we wanted to keep it and rent it out instead of selling it after foreclosure.

I've made many loans like this over the years. If you want to know more about how the process works, including how to evaluate deals to see if they are safe / profitable or not, check out my old real estate blog for details on my previous loans. Search for "hard money" on that site. My 8% return on this loan is about double the current dividend rate on Realty Income stock, which is why I sold the stock and moved my money into this investment.

Oh, and I hit another milestone this month: our highest net worth ever!

Net worth is calculated by adding up all our assets and subtracting all our liabilities. I don't normally track this figure closely, which is why I don't talk about it much here, but I glance at it now and again when I'm logged in to The actual value bounces around a lot because it includes my wife's and my retirement accounts, which are invested in the stock market and hence subject to value fluctuations daily. Still, I think this is the first time we've crossed the $600,000 threshold.

As a reminder, if you have any questions or suggestions for topics, feel free to contact me by clicking on the Contact link at the top of the page!


Post a Comment